VeriSign Faces Headwinds Despite Strong Market Demand
Performance Lagging Behind Broader Market Trends
VeriSign, Inc. (VRSN), based in Reston, Virginia, is known for its domain name registry services and internet infrastructure. With a market capitalization of $18 billion, the company is vital for ensuring the security, stability, and reliability of essential internet infrastructure, including root zone management.
Stock Struggles Amid Growing Competition
Over the past year, VRSN shares have significantly underperformed compared to the broader market. The stock has declined 15.6%, while the S&P 500 Index ($SPX) has increased nearly 31%. In 2024, VRSN is down 12.2%, contrasting sharply with the SPX’s impressive 25.2% rise year-to-date.
Comparative Performance Shows ETF Advantage
When contrasting with the iShares U.S. Technology ETF (IYW), VRSN’s performance looks even more dismal. The ETF has appreciated approximately 35.5% over the past year, with a 29.6% gain year-to-date, starkly outpacing VRSN’s struggles during the same periods.
Regulatory Scrutiny Adds Pressure to Stock
On November 22, VRSN shares fell more than 2%, ending a three-day winning streak after Senator Elizabeth Warren and Congressman Jerry Nadler called for an investigation into the company’s pricing practices. Their letter to the Department of Justice and the National Telecommunications and Information Administration alleges that Verisign is exploiting its monopoly on “.com” domain names to impose “excessive prices” on customers.
Third-Quarter Results Mix Growth with Decline
Following the release of its third-quarter results on October 24, VRSN’s stock dipped by 2.1% in the next trading session. The company reported a revenue of $391 million, marking a 3.8% increase year-over-year. Operating income rose to $269 million from $254 million the previous year. Net income stood at $201 million, resulting in earnings per share (EPS) of $2.07.
Analyst Expectations for Future Growth
For the current fiscal year ending in December, analysts anticipate VRSN’s EPS to grow by an astonishing 13,717.4% compared to the previous year. The company has a solid track record, having met or exceeded consensus estimates in each of the last four quarters.
Market Consensus Shows Cautious Optimism
Among the two analysts covering VRSN stock, the consensus is a “Moderate Buy,” supported by one “Strong Buy” rating and one “Hold.” This reflects mixed sentiment as analysts weigh the company’s potential against current market challenges.
Future Outlook and Analyst Recommendations
On October 25, analyst Robert Oliver from Robert W. Baird maintained a “Hold” rating on VeriSign, with a price target set at $200. Although the company’s Q3 2024 financial results met expectations, it has trimmed its domain name growth forecast due to persistent challenges in the U.S. and China markets. Furthermore, the effectiveness of new registrar marketing initiatives is anticipated to take longer than previously thought, adding uncertainty to projected growth in 2025.
The mean price target of $205 indicates a potential increase of 13.4% from VRSN’s current price. The highest price target of $210 suggests an upside of 16.2%.
On the date of publication, Kritika Sarmah did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are solely for informational purposes. For more details, please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
